Peloton Stock Analysis

Down 20% from all time highs on positive vaccine news

By: Gabriel Rodriguez

What is Peloton?

Peloton makes at-home gym equipment and subscription-based workout videos that customers can stream through an app on personal devices or Peloton fitness devices. Fitness devices include an exercise bike and treadmill that come equipped with a screen that displays workout videos and live classes through the Peloton app. The business model combines hardware sales and content subscription. Peloton has benefited from the COVID-19 lockdown as consumers look to exercise from home. Peloton (PTON) stock is up nearly 250% year-to-date and down nearly 20% in the past few weeks along with other stay-at-home stocks like Zoom (ZM). This comes after news that Pfizer (PFE), in partnership with BioNTech (BNTX) have developed a vaccine with 90% efficacy and that 50 million doses could be distributed before the end of 2020, and 1.3 billion doses in 2021. What does this mean for the future of Peloton, a stock that soared due to the pandemic? Is it doomed because it depends on the lockdown, or are we seeing an overreaction to positive vaccine news?


Peloton has been beating analyst estimates and rapidly growing revenues ever since their IPO about a year ago; the pandemic has only accelerated this revenue growth. With two sides to the business, the company has two main revenue streams. Hardware revenue amassed $602.4M and content subscription revenue reached $165.6M in the most recent quarter. This amounts to $757.9M in quarterly revenue and represents revenue growth of 232% year-over-year. The company also achieved free cash flow growth of 131% year-over-year. This growth is clearly being priced into the stock, suggesting its valuation could be overextend if this type of growth is unsustainable.


Traditional valuation metrics would suggest that Peloton stock is overvalued, trading at around 875x earnings. Despite this, it may not really be as heavily overvalued as many investors probably believe. An important metric for Peloton is their connected fitness subscribers because it represents the recurring customer base that contributes to the most reliable revenue stream of their core business. Connected fitness subscribers have more than doubled since last year and this growth could continue.

The Future of Peloton

Demand for Peloton's products will likely continue beyond the pandemic. Many people who have already invested in personal fitness equipment will continue to use it in the safety and comfort of their own homes. About 1.334 million connected fitness subscribers have bought a Peloton product and pay $39.00 per month to access the growing library of fitness classes with world class trainers. With this segment of the business growing, Peloton is positioned to lead the home-based fitness market for years ahead.